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Source of Title Blog

Osama The Mortgage Broker
by Robert Franco | 2007/08/27 |

According to a survey by the National Association of Business Economists, the biggest threat to the economy is no longer terrorism and the Middle East - its the threat of subrpime mortgage defaults and "excessive indebtedness." Obviously, the lending crisis has had quite an effect on Wall Street already. But, the real problems may be just beginning as the supply of cheap money dries up and so many debt ladened Americans find themselves unable to continue their borrow and spend habits.

According to an article in the Financial Post, Debt Crisis Tops Terrorism as Threat to U.S. Growth:

The meltdown in the US$2-trillion subprime mortgage has led to the bankruptcy of dozens of mortgage firms and is threatening to spill over into the broader economy as more and more homeowners face foreclosure.

The U.S. Center for Responsible Lending recently estimated that 2.2 million subprime home loans made in recent years have -- or soon will -- end in foreclosure.


Who is going to buy all of those foreclosed properties? The housing market is already fairly stagnant and adding more homes that will likely be sold below fair market value will inevitably lead to a further decline of home prices. That will mean less equity to borrow against and put more pressure on a struggling economy.

The article goes on to indicate that this may just be a temporary bump in the road:

However, Mr. Tannenbaum [president of NABE and chief economist at La Salle Bank/ABN-AMRO] said he expects the crisis will soon pass, largely because of the strength of the broader economy, the world's largest.

"These concerns appear to be somewhat transitory as the five-year outlook for housing remains positive," he said.


I'm not so sure I agree. Once the effect of the 2.2 million foreclosures, and the realization that the American debtor is already carrying an excessive debt-load sinks in, the five-year outlook will likely be adjusted. But, regardless, we are in for a bumpy ride the next few years.

Robert A. Franco
SOURCE OF TITLE
rfranco@sourceoftitle.com


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Categories: Economic Indicators, Mortgage Industry, Subprime Lending

473 words | 2670 views | 3 comments | log in or register to post a comment


The unfortunate part of all th...
The unfortunate part of all this is that, for the most part, people suffer from money ignorance. I don't mean it in a cruel way, but they don't know how money or debt works. We also live in a "got to have now" age and a "it's not my fault" and "I am a victim" attitude towards their situation. The people in this situation did not explore what would really happen in their ARM mortgage and the real possibilities of what could happen. You should be responsible for your own actions and if you don't understand it, don't sign it. Yes homeownership is the American Dream, but you don't step out in front of a speeding truck just to pick up a $1.00.
Yes there will be a lot of foreclosures yet to come and the banks will either become real estate owners or investors will come in and get them at bargin prices and rent them out to those who lost them.
I agree that it will take a couple of years for the Real Estate Market to recover. In the mean time more lenders, title companies and abstractors will be closing their doors as a result.
 
by Jay Duncan | 2007/08/27 | log in or register to post a reply

That will mean less equity to bo...
That will mean less equity to borrow against and put more pressure on a struggling economy.

If our economic prosperity is depending upon people to cash out all of the equity in their home to finance spending, then our economy is truly built on a really shaky foundation. I don't believe that is the case though.

Put me the optimist camp. Real estate prices will continue to stay the same or decline over the next few years, but not dramatically. Crashes have already happened in the markets where they are going to happen.

Defaults will rise and then level off in the next year or so. Consumer confidence may take a hit, but the rest of the overall economy will stay sound. In five years we will back to normal and houses will start appreciating again.
 
by David Jenkins | 2007/08/27 | log in or register to post a reply

NOT TO WORRY! AFTER THE ELECTIONS,...
NOT TO WORRY! AFTER THE ELECTIONS, NOT ONLY WILL WE BE GIVEN GOVERNMENT HEALTH-CARE, SINCE IT'S "EVERYONES RIGHT TO OWN A HOME" THE GOVERNMENT WILL TAKE ALL THE FORECLOSURES AND GIVE THEM TO THE "LESS FORTUNATE". DON'T KNOW WHAT WE WILL DO THEN BUT WHAT THE HEY, BIG BROTHER WILL TAKE CARE OF US. JON 
by JON A SARVER | 2007/09/04 | log in or register to post a reply
Source of Title Blog

Robert A. FrancoThe focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco
SOURCE OF TITLE

 

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